06-17-2019: August Gold: Regaining Status as International Medium of Exchange

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calendar Spread

Level Table
Other Factors
Recommendation

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4

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5     6


Introduction

1 The story on gold could be as simple as geopolitical crises stirred up by the attack on oil tankers on the Gulf of Oman, or the notion that the Federal Reserve will not continue to raise interest rates thus making gold more competitive as an investment than interest-bearing investments. Or it could be as complicated as recognizing the irresponsible way the Republicans ran up the overhanging national debt to the point where there would seem to be no way to pay it off without a depression. Beyond that, other nations competing for their currencies being the standard for international transactions rather than the U.S. Dollar, have seen a potential benefit in returning to the gold standard. Backing their currencies with something other than just paper makes a lot of sense.

Gold charts look considerably "reactive" suggesting that a general upward movement in gold prices may trace out a forgiving "windy" path rather than going straight up.cd \wp


Intermarket Analysis

We fed Gold, Silver, and Platinum into a neural network to get the following result:




Parabolic Chart

August Gold:

Parabolic Chart


Nirvana Chart

August Gold:

Initial Chart


News Analysis

While gold is short-term "overbought", a number of geopolitical flash points have emerged, not the least of which is the possible Iranian respopnsibility for attacks on oil tankers in thie Gulf of Oman. Tensions between the U.S. and China also were raised by U.S. demands that China be represented at the G20 meeting to further negotiate or else "tariffs will be raised further." Middle Eastern accumulation of gold is evident as threats seem to be concentrated there. Paul Tudor Jones, a trader with a high success record projects gold to go to $1,700. Price and inflation data coming out of the U.S. this past week which includes low numbers making gold a more attractive investment than interest rate sensitive investments. There is also a long-term pattern of declining gold production from South Africa. South African gold production showed a 19.5% annual decline in latest figures. Significant gains in the U.S. Dollar and strong U.S. sales/industrial production data will be supportive for gold prices.

While Chinese industrial output declined to the lowest in 17 years, Chinese retail sales were better-than-expected. Similar reports are out of Italy. In the U.S. comparable data is showing modest upticks.

While gold prices broker through critical resistance upward, to their highest level since April, 2018, some analysts are warning that a short-term setback may result from Federal Reserve's dovish stand on raising interest rates. Updated economic projections at the June Federal Reserve policy meeting may represent the most significant risks to gold prices. Slowing industrial growth and confusing trade policies are not good for gold. In fact, markets may be pricing in an 80% chance of a looser Fed monetary policy in July. Some see a lack of a rate cut soon as negative for gold. Most analysts discount the possibility of a Fed rate cut soon.

Investment capital heading into gold mining exploration is all but dead according to industry executives. Focused management of mining operations has to look farther into the future. Industry sentiment is low and more merger and acquisition activity is expected in the mining industry.

Gold futures for August delivery are the most heavily traded U.S. contract. News suggest that Middle East tensions and a weak Chinese economy are the two major driving factors. These two factors lift safe-haven aspects for gold.

Wall Street and Main Street as a whole seem to be looking for still higher gold prices, but gold has lost some altitude as shorter-term traders take profits.

"Daily Gold Standard" reports that, "The more times a level is tested, the weaker it becomes and the more likely to break." Over the years since 1955, gold stocks have gained an average of 172% from the bottom at the first rate cut. The start of a rate cut is usually bullish for precious metals. There were exceptions in 2017-18. A steady U.S. Dollar could also be bullish for gold. Certainly a weaker U.S. Dollar would push gold prices higher.

President Trump's borderline craziness including enacting a tax on U.S. citizens in the form of tariffs on imported goods from Mexico, off again, on again, is causing investors to become fearful. This is bad for stocks, good for gold. Gold prices rocketing down came with reforms in Russia and China, but now all this appears to be going backward with the opposite effect on gold.

Steve Forbes released his opinions on gold starting with claims that the Federal Reserve has a horrible track record. Its projections for the economy are often flawed continuing with its present dovish stance. The biggest mover in metals this past week has actually been palladium. It surged 6.6% in one week. Forbes points out that the Fed has been arguably successful at keeping the stock market elevated while holding the Consumer Price Index down. But investors who expect perpetuallyi rising asset markets combined with permanently low inflation should understand that nothing lasts forever. According to Robert Kiyosaki, a friend of Trump's, who helped Trump write some of his books on how to be rich, our monetary system is "fake." That's because of all the excess debt hanging over the economy, made possible by the Fed, and causing us to head into a depression.

The U.S. may have jumped the gun on blaiming Iran for the sabotage of two oil tankers. It is difficult to imagine what Iran would gain from damaging the tankers other than a demonstration of how it could control the Hormuz Strait and block tanker access to Saudi oil fields. One of the tankers was registered to Japan which is anticipating a state visit to Iran shortly. An attack could draw both Russia and China in support of Gulf nations rather than Iran. Clearly the current activity in gold is largely due to the "flash point" of the tanker incidents. If the U.S. were to confront Iran militarily, it would likely not have the support of most of its allies.

The Russian Government intends to return to the gold standard and is thinking about using cryptocurrency as a tool to reduce dependence upon the U.S. Dollar. Its return of gold to the world market would be believed to be the strongest blow to the U.S. Dollar. Since the U.S. brought the world out of the gold standard, the world economy has been using U.S. Dollars instead.. But U.S. Dollars are not backed by anything, and are just "paper." Therefore, if Russia continues to rapidly increase its gold reserves and put gold-backed currency into operation for international settlements, dependence upon the Dollar would be reduced. Last year Russia was the biggest buyer of gold. Over the past ten years it has increased its gold reserves by 400%.

Under Russian xchemes, cryptocurrencies would not be just lines oif computer coding, but would be backed by gold. Cryuptocurrency could also set its value tied to the value of gold. There have even been rumors of a joint cryptocurrency between Russia and China. That could become a method for international bank transfers between legal entities. Currently there are four cryptocurrencies where value is tied to the price of gold on the London Exchange, three of which are 100% secured by actual gold deposits. This "virtual gold rush" is gaining momentum.

The ability to sell gold is limited by sanctions imposed by the U.S. Government. For example, Venezuela cannot sell its reserves locked in the Bank of England.


Point & Figure Chart

150.0|                                                                  T  6/14
     | CMX - Aug-19 Gold, 100 troy oz., $/oz.      Cm.=0.00  Lim.= 0.9
     |
     |
     |
145.0|_________________________________________________________________________
     |                      X
     |                      XOX
     |                    X XOXO
     |                    XOXOXOX
140.0|____________________XOXOXOXO________X____________________________________
     |                    XO O OXOX       XO  X X X X
     |                  X X    O OXO      XO  XOXOXOXO
     |                X XOX      OXO      XO  XOXOXOXO
     |                XOXOX      OXO      XO  XO OXO O
135.0|________X_______XOXOX______OXO______XO__X__O___O__X_X____________________
     |        XO      XOXOX      OXO  X X XOX X      O  XOX
     |        XOX X X XOXO       OXO  XOXOXOXOX      O  XOX
     |      X XOXOXOXOXOX        OXO  XOXOXOXOX      O  XOX
     |      XOXOXOXOXOXOX        O OX XOXOXO OX      O  XOX
130.0|______XOXO_O_OXO_OX__________OXOXOXOX__OX______O__XOX____________________
     |      XOX    OX  OX          OXOXOXOX  OX      O  XOX
     |      XOX    O   OX          OXOXOXOX  O       O  XO
     |      XO         O           OXOXO OX          O  X
     |      X                      OXOX  O           OX X
125.0|______X______________________OXO_______________OXOX______________________
     |    X X                      OX                OXOX
     |    XOX                      OX                OXOX
     |X   XOX                      OX                OXO
     |XOX XOX                      OX                OX
120.0|XOXOXOX______________________OX________________OX________________________
     |XOXOXOX                      OX                O
     |XOXOXOX                      O
     |XOXO OX
     | O   OX
115.0|_____OX__________________________________________________________________
     |     OX
     |     OX
     |     OX
     |     O
110.0|_________________________________________________________________________
     |
     |
     |
     |
105.0|----|----|----|----|----|----|----|----|----|----|----|----|----|----|---
          11                      111       111        11
      88990012233333444566667778990123355679002222344481236
      12130201211112122002220122012030101121122012201221000
      86706966446673128931485294658903617514372747361522413
The above chart is giving a conventional buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical low and detect no seasonal trends.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "Project". It is giving a buy signal.

Internal Printout 1

Results of "Project" for Gold (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system is working on a longer-term sell signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $100. Initial margin on a single contract is $3,740. Use of options is advised.


Historic Range

Scale traders are not a factor in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are getting increasingly-long.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to down is imminent near a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) December Gold 1350 Call and Sell (1) December Gold December 1360 Call @ 0.80 to the buy side or less.


o 1 o 2 o 5


o 3


o 4


Calendar Spread

What the Aug. - Aprl calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up in the long run. The best time to enter or leave the above spread is when it is at -19.00 or narrower buying the far as prices are rising and then selling the near, and exiting or entering when it is at -28.00 or wider selling the far as prices are falling and then buying the near. At this time, we appear to be headed toward the buy the far, sell the near point.





Level Table:

Level Table

The path of least resistance is up.
138|                                                                 R  6/14
 CMX - Aug-19 Gold, 100 troy oz., $/oz.      Cm.=0.00  Lim.= 0.9
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132|QQRRRRRRRRRSUUUUZZZZ_____________________________________________________
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     |AOQQRSTTTTUUUUVVZ
     |AAOOPPPPPPPPQSTTTTTTUUVVVVZ
130|AAAOOOPPPPPPPPPPQSSTTTTTUUVVVXZ__________________________________________
     |AAAAOOOPPPPQSSTTTTUUUVVXXYZ
     |AAABOOOOPPPQQQQQSTTTTUUUVVVVVVVXXYYZ
     |ABBOOOOQQQSTTTUUVVVVWXXYZ
     |AABBBBOOTVVWWWWXXXXXYYZZ
128|AAABBBBBBOOOWWWWWXXXXXXXYYYYYZ___________________________________________
     |AABBBBOOWWWWWWWXXXXYYYYZ
     |BBBBBOOOWWWWWWXXXYYYYYYZ
     |BBBBBBCNOOWWXXY
     |BBBCNNNNOX
126|CCCKNNNNNNNNO____________________________________________________________
     |CCCCCJKKMNNNNNNNNO
     |CCCCCCCCDJKKKKKKKLMMNNNN
     |CCCCCCCCCDDJJJJJKKKKKKKKLMMMN
     |CCCCCDDDJJJJJJJJKKKKKKLLMMM
124|CCDDDDDDJJJJJJJKKKLLLLLMMMMMM____________________________________________
     |CDDDDDDDDJJJKKKLLLLLMMMMMMM
     |DDDDDDDEFGJKKLLMMM
     |DDDEEFFFFGGGGJKLLLMM
     |DEEFFFFFFGGGGGGGHHHHJLLLL
122|DEEEFFFFFGGGGGGGGGGHHHHHHJLL_____________________________________________
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     |EEEEFFFFGGGGHHHHHJJL
     |EEEEFHHHHHHJ
     |EEEEHHHHHJ
120|EEEHHH___________________________________________________________________
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118|_________________________________________________________________________
     |
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116|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO= 0.389
                       1 1 1 1 1 1                                    
       6 7 7 7 8 8 9 9 0 0 1 1 2 2 1 1 2 2 3 3 4 4 5 5 5 6           6
       1 0 1 3 1 2 1 2 1 2 0 2 0 2 0 2 0 1 0 1 0 1 0 1 3 1           1
       9 2 7 1 4 8 2 6 0 4 7 1 6 0 7 1 4 9 5 9 2 6 1 5 0 3           4


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 6/14 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                     GCQ9    August Gold

                      High Price:  1396
                   Current Price:  1345
                       Low Price:  1319

                            Risk:  0.038
                     Opportunity:  0.075

                    (O/R) Ratio =  1.962


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis + 1
Parabolic Chart + 1
Nirvana Chart + 1
News + 1
Point & Figure + 1
Cyclicals - 1
Seasonals 0
Internal System 1 + 1
Internal System 2 0
Third System - 1
Historic Range 0
Commitment of Traders + 1
Range/Volatility - 1
Level Table + 1
Other Factors + 1
Total + 6
Place 4 August Gold on a Buy Watch with stoploss @ -7.98 below the get-in point when recent price is represented as "134.45".
____________________________________________________________________________________________________________________________________________G.S.